U.S. Posts Second-Largest Annual Budget Deficit

Oct. 15 (Bloomberg) -- The U.S. government posted its second straight annual budget deficit in excess of $1 trillion as lingering unemployment constrained tax revenue.

The shortfall totaled $1.294 trillion in the fiscal year ended Sept. 30, second only to the $1.416 trillion deficit in 2009, the Treasury Department said today in Washington.

A jobless rate projected to exceed 9 percent through 2011 points to the difficulty of narrowing the budget gap even as the global economic recovery boosts company profits and produces more corporate tax receipts. Growth in government spending may slow because of declining costs associated with the financial crisis that spawned such rescue plans as the Troubled Asset Relief Program.

"We still have a long way to go to repair the damage to the economy and address the long-term deficits caused by the crisis," Treasury Secretary Timothy F. Geithner said in a statement.

The Treasury Department finances the shortfall between taxes and spending with borrowing in financial markets. The national debt totals more than $13 trillion, exceeding the size of the economy, unadjusted for inflation. The government's fiscal year runs from Oct. 1 to Sept. 30.

The Obama administration in July projected in its mid- year budget review that the deficit would be a record $1.47 trillion during the 2010 fiscal year.

While the shortfall was less than the administration had forecast, "the president thinks we still need to do a lot of hard work in order to get our fiscal house in order," White House deputy press secretary Bill Burton told reporters today aboard Air Force One. Obama wants to make sure the U.S. "is on the right track" to reducing the deficit, he said.

In September, the budget shortfall was $34.5 billion, the second straight year of uninterrupted monthly deficits, compared with $45.2 billion in September 2009, according to the Treasury.

Economists projected a September deficit of $32 billion, according to the median of 28 forecasts in a Bloomberg News survey. Estimates ranged from shortfalls of $30 billion to $69 billion.

The budget deficit and Americans' concern about employment and the economy may usher in a change in leadership on Capitol Hill. Four of five Tea Party supporters who say they plan to vote in the November congressional elections will back Republicans, a Bloomberg National poll showed.

Eighty-five percent of these respondents say the economy will improve with Republicans in control of Congress, according to the poll conducted Oct. 7-10 by Selzer & Co. Tea Party backers, who plan to vote, put a higher priority than other voters on cutting spending and lowering taxes.